Bank of America (NYSE:BAC) Is Increasing Its Dividend To $0.28

Bank of America Corporation (NYSE:BAC) will increase its dividend from last year's comparable payment on the 26th of September to $0.28. Even though the dividend went up, the yield is still quite low at only 2.3%.

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Bank of America's Earnings Will Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive.

Having distributed dividends for at least 10 years, Bank of America has a long history of paying out a part of its earnings to shareholders. Based on Bank of America's last earnings report, the payout ratio is at a decent 30%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 37.0%. Analysts forecast the future payout ratio could be 29% over the same time horizon, which is a number we think the company can maintain.

Check out our latest analysis for Bank of America

Bank of America Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.20 in 2015 to the most recent total annual payment of $1.12. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Bank of America has grown earnings per share at 11% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Bank of America's Dividend

Overall, a dividend increase is always good, and we think that Bank of America is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Bank of America that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.